GST: Centralized assessment for service-oriented industries likely

The goods and services tax (GST) council is considering setting up a centralized assessment interface for service-oriented industries such as banking, telecom, insurance and information technology, according to two officials familiar with the discussions in the GST council.

A common pool of officers drawn from the centre and the states could carry out the assessment for certain service sectors thereby ensuring a single interface for these sectors, according to the proposal being discussed in the council.

The move will potentially exempt taxpayers operating in these industries from having to register in every state they operate.

The current GST draft law has retained a provision that requires these service providers to register in every state they operate, despite opposition from industry which pointed out the sharp rise in compliance requirements for the services sector under GST as against the current existing regime. In the existing service tax regime, service providers need to register with the central indirect tax authorities.

Various service industries and government departments had made specific presentations to the council pushing for single registration.

However, the council did not accept the demand for single registration as states feared loss of revenues and excessive dependence on the centre for receiving taxes due to them. This means that companies operating in the services space pan India will need to obtain more than 30 separate registrations and file nearly 2,000 returns annually.

The common assessment proposal being discussed is aimed at making the compliance requirements of these businesses under the new indirect tax regime simpler. “There have been talks in the council if we could look at a common assessment for the services sector to ensure that one company does not have to deal with multiple tax authorities. However, no final mechanism has been worked out yet,” said one of the officials.

A single audit and assessment is helpful but does not take the sting out of the provision of needing to register in every state, said Rajan Mathews, director general of Cellular Operators Association of India. “A big problem for the telecom industry is that the licensed service area is spread across state lines. How do we settle the proceeds across state jurisdictions? There are also place of supply issues as a customer may buy a SIM card in one state but use it in another state,” he said.

A centralized audit and assessment interface being discussed by the GST council will provide some respite for the industry, said a member of the general insurance council, the representative body of general insurance companies.

“However, there are a number of issues that remain unresolved. For instance, what will be the representation of the producing and the consuming states in this body. Where will the audit happen—in states or in the place the head office is located? At the end of the day, the main concern for the industry is seamless availment of input tax credit,” said the member, who did not want to be identified since the details are yet to be made public.